by John Darer® CLU ChFC CSSC RSP CLTC
Annuities are contracts that are issued by life insurance companies. A structured settlement annuity is a type of annuity contract. A number of the life insurance companies that issue structured settlement annuity contracts have been in business for over 100 years, with several in operation since the 1800s! 4structures.com LLC has compiled a "structured settlement annuity company museum" on Pinterest containing interesting exhibits of architectural images, vintage advertising and emphemera associated with these companies that highlight their longevity.
Companies offering structured settlement annuity contracts must be first approved by the Department of Insurance or Department of Financial Services in each state that they do business. State regulators evaluate the insurance company's solvency and its compliance with state insurance laws and other regulations. Insurers are subject to mandatory annual audits and other financial compliance measures. Insurer reserves must hold assets sufficient to equal or exceed the contractual payment obligations.
The assets backing the reserves may not be removed from the insurance company. Insurer general accounts support the obligations of the insurance companies, not the obligations of its parent company or other subsidiaries. A classic recent example of how that works would be in the 2008-2009 financial crisis. Following the AIG bail out in September 2008, some expressed concern about AIG subsidiaries that issued structured settlement annuities, yet the reserves backing the obligations of those subsidiaries could not be invaded by the parent, or AIG Financial Products, which was the division of AIG that oversaw the credit default swap business that was at the root of the crisis.
Generally, under Federal law, life insurance companies cannot file for bankruptcy protection.
The only instance where structured settlement annuitants have lost money stems from 1980s era sales of Executive Life Insurance Company of New York structured settlement annuities, where it was argued in a 2012 legal proceeding that New York state regulators mismanaged the assets of the ELNY estate after taking over the company in April 1991.